Market Report Wrocław office market

Savills World Research
Poland Offices
Market Report
Wrocław office market
March 2014
graph 1
graph 2
Stock, developments and vacancy in major
regional cities
Office stock in major regional markets by city
800,000
20%
12%
22%
600,000
Katowice
15%
sq m
Krakow
400,000
25%
10%
Lodz
Poznan
17%
200,000
5%
Tricity
Wroclaw
0
12%
0%
Katowice
Krakow
Lodz
Graph source: Savills
Poznan
Tricity
12%
Wroclaw
Graph source: Savills
SUMMARY
Overview
■ The total modern office stock in
Wroclaw reached 541,300 sq m at
the end of 2013, reflecting an annual
growth by ca. 73,600 sq m.
■ New supply comprised nine
buildings, the largest of which was the
office part of Sky Tower (28,100 sq m).
■ As a result of high development
activity over the last two years, the
average vacancy rate increased in
2013 to 11.7% compared to 8.0% at
year-end 2012 and 4.5% at the end of
2011.
■ In comparison with other regional
markets, letting activity remained high
last year, with ca. 69,700 sq m leased,
however, was ca. 22% lower than in
2012.
■ We expect ca. 55,000 sq m of new
office space to be delivered in Wrocław
in 2014, and up to 155,000 sq m in
2015.
■ Prime office rents remain stable
at €14.00-15.00 per sq m/month,
however, we may see more downward
pressure on effective rents, especially
in case of pre-lets.
“The pace of office
development in Wroclaw is
accelerating, which is expected
to put more downward
pressure on effective rents,
which may further increase
the competitiveness of
this established market.”
Tomasz Buras, Savills Office Agency
savills.pl/research
01
Market in Minutes | Wrocław office market
Wrocław
With over 631,000 inhabitants Wroclaw
is the fourth largest city in the country.
Wroclaw is a strong economic,
educational and cultural centre. The
city’s position as an academic centre
is proven by over 134,300 students
at 25 higher education institutions of
which the largest are the University
of Wroclaw, Wroclaw University of
Technology and Wroclaw University of
Economics.
The ca. 105,100 business entities
registered in Wroclaw create ca 3%
of the country’s GDP. The November
2013 unemployment rate was 5.7%,
much below the Polish average
(13.2%) and the avergae gross salary
was PLN 3,924 per month, ca. 5%
higher than the national average. The
city’s economy is diversified from
IT companies (e.g. HP, Atos, Dolby,
IBM, PGS Software, Sygnity) via
financial services (e.g. Credit Suisse,
Credit Agricole, Kruk, VB Leasing)
and automotive industry (e.g. Volvo,
Faurecia, Wabco) to life sciences
(e.g. Hasco-Lek, MacoPharma, US
Pharmacia).
Proximity of the A4 motorway provides
good road access to Krakow, Silesia
and Germany. The city's international
airport connects to more than 30
European destinations.
General Overview
Modern office stock in Wroclaw
reached almost 541,300 sq m at the
end of 2013, of which 73,600 sq m
was delivered to the market last year.
Thus, Wroclaw is the second largest
“Last year's new supply reached 73,600
sq m, significantly above it's 10-year
average of 31,100 sq m. Now we expect
up to 210,000 sq m of new office space
to be deliverd over the next 24 months.”
Tomasz Subocz, Savills Office Agency
office market among Polish regional
cities (excluding Warsaw), with the
office stock ca. 13% smaller than in
Krakow.
which was 11.6% higher than in 2012
and significantly more compared to
the 10-year average new supply of ca.
31,100 sq m.
Major office locations in the city are
the Old Town and its surroundings
dominated by tenement houses
converted into office buildings and
some new developments (Bema Plaza,
Grunwaldzki Center); Southern parts
of the city along Powstancow St.
and Karkonoska St. where Aquarius
Business Centre, Rodis Centre and
Racławicka Center amongst others
are located and finally western parts
of Wrocław along Strzegomska St.,
Legnicka St., Lotnicza St. where
projects like Wojdyla Business Centre,
Green Towers or Millenium Towers are
located.
The largest projects completed last
year were: the office part of Sky Tower
by LC Corp (28,100 sq m), the second
building at Green Towers by Skanska
(10,800 sqm) and the second phase
of Aquarius Business House by Echo
Investment (9,000 sq m).
Local developers such as Vantage,
Archicom, Descont, Devco, Fig,
Gant, Wojdyla Budownictwo play an
important role developing some of the
most recognizable buildings in the city.
New Supply
Over 73,600 sq m of new office space
was delivered in Wroclaw last year,
Development activity is now
accelerating, which confirms developer
confidence about marketability of their
new projects in Wroclaw. Currently,
over 103,000 sq m of new office
space is under construction, of which
ca. 55,000 sq m is scheduled for this
year. In 2015 new supply may reach
a record high level of up to 155,000
sq m.
Skanska, Echo Investment and
SwedeCenter are currently the most
active developers in regional cities, and
this is also the case in Wrocław, where
they have ca. 35% share in the 24
month office pipeline.
graph 3
graph 4
Developments by city
New supply, net absorption and vacancy in Wrocław
14.6%
21.1%
New supply (sq m)
125,000
Katowice
Net absorption (sq m)
Vacancy (%)
15%
100,000
12%
75,000
9%
50,000
6%
25,000
3%
Lodz
25.3%
Poznan
sq m
Krakow
19.2%
Tricity
Wroclaw
11.9%
Graph source: Savills
02
7.7%
0
0%
2007
Graph source: Savills
2008
2009
2010
2011
2012
2013
March 2014
The largest developments in Wrocław
are Dominikanski, a 36,500 sq m
office development by Skanska to be
delivered in the second quarter of 2015
and the first phase of Business Garden
Wroclaw, a 24,000 sq m development
by SwedeCenter to be completed by
year-end 2015.
Availability
High development activity over the last
two years led to significant growth in
the average vacancy rate from 4.5% at
high and accounts for ca. 80% of total
office space under construction.
Demand
In comparison to other regional cities
demand for office space in Wrocław
remains high. A higher volume of
leasing transactions signed in 2013
was recorded only in Kraków. On the
other hand, net absorption figures
are more supportive for Wroclaw,
which means, that higher share of
new leases in Wrocław accounted
“Rising office availability is an advantage
for newcoming companies allowing them
to choose from wider offer and negotiate
more favourable terms.”
Tomasz Buras, Savills Office Agency
the end of 2011 to 8.0% one year later
and further to ca. 11.7% at the end
of 2013. This is a relatively high level
for Wroclaw compared to historical
data, but nearly in line with current
average vacancy rate for all Polish
major regional office markets, which is
esimated at 10.9%.
Tenants looking for larger office within
existing office buildings have a choice
of 11 buildings offering 2,000-5,000 sq
m. There is no existing office property
offering more than 5,000 sq m . In this
case tenants have to choose among
buildings that are under construction
or planned. Within office buildings that
are under construction, availability is
for newcoming companies and
expansions whereas in Kraków takeup was dominated by relocations and
renewals.
In 2013 Wroclaw had also the highest
volume of expansions among regional
cities which confirms that business
was developing well in this location.
The average size of the office leased
in Wrocław in 2013 was 1,180 sq m,
however, within the pre-let deals it
was significantly larger at ca. 3,200
sq m.
The biggest leases signed in 2013
were: the Getin Group at Sky
TABLE 1
Wroclaw - key facts
631,188
Population
(Dec 2012)
5.7%
Unemployment
(Nov 2013)
PLN 3,924 per month
Average gross salary
(2012)
134,383
Number of students
(2012)
35,151
Number of graduates
(2012)
25
Higher education
institutions
Wroclaw Nicolaus
Copernicus Airport
International Airport
1,942,000
+20.9% y-o-y
Number of passengers
(2012)
Selected BPO/SSC/
IT/R&D companies
HP, Credit Suisse,
Capgemini, IBM, Nokia
Siemens Networks, Tieto,
Volvo, UPS, Unicredit, Ernst
& Young, Geoban
Modern office stock
(Q4 2013)
541,300 sq m
Under construction
(Q4 2013)
103,000 sq m
63,100 sq m
Available office space
(Q4 2013)
11.7%
Vacancy rate
(Q4 2013)
47,900 sq m
Absorption
(2013)
Source: Savills / GUS
graph 5
TABLE 2
Absorption in regional cities in 2013
Largest office projects to be
completed in 2014 - 2015
80,000
70,000
sq m
60,000
Project
Developer
Green Day
Skanska
Size
Date
14,000
Q2 14
Silver Tower Center
Wisher Enterprise
7,200
Q3 14
50,000
West Gate
Echo Investment
16,200
Q4 14
40,000
Promeandy Zita
Vantage
Development
22,000
Q4 14
Dominikanski
Skanska
35,500
Q2 15
Gamma
Vantage
Development
14,500
Q2 15
Millenium Tower III
Descont
11,800
Q3 15
Business Garden
Wroclaw I
SwedeCenter
24,000
Q4 15
30,000
20,000
10,000
0
Katowice
Graph source: Savills
Krakow
Lodz
Poznan
Tricity
Wroclaw
Source: Savills
savills.pl/research
03
Market in Minutes | Wrocław office market
Tower (11,700 sq m), Kruk at Wroclaw
Business Park (7,500 sq m), Credit
Suisse expansion at Green Day (4,300
sq m) and Dialog at West House
(3,500 sq m).
Service charges vary between PLN
12.00 and PLN 16.00/sq m/month.
The cost of underground parking
space ranges between €50.00 and
€80.00 per month.
Rents
Prime office rents in Wrocław are
expected to remain stable in 2014,
and may decrease in 2015 due to high
development activity. ■
Despite the increase in vacancy to
11.7% prime headline rents have
moved very little and are in the range
of €14.00–15.00 per sq m/month.
Rents in older buildings with poorer
specification range from €11.00 to
€14.00 per sq m/month. It is common
practice in those buildings to quote
rents in Polish złoty.
graph 5
Headline office rents in major regional cities
16
Vacancy to grow in 2015 due
to increased development
Development activity is accelerating and taking into
account current development pipeline, modern office
stock may increase to ca. 750,000 sq m by the end
of 2015, growing by almost 40% over the next two
years.
Demand for office space in Wrocław is strong, which
is confirmed by the 7-year average absorption level
of ca. 41,000 sq m and a visible post-crisis recovery
over the last two years. Moreover, recent statistics
regarding expansions is also a good evidence of
business development in Wroclaw.
Our analysis indicates that in 2014 new supply will
be nearly in balance with projected absorption level.
Thus, the average vacancy rate is expected to remain
stable at ca. 12%. The development pipeline for
2015 is much higher, which may lead to a significant
increase in average vacancy, if all projects are
delivered on time.
15
14
€/sq m/month
OUTLOOK
13
Competition among office developers is getting
tough, allowing potential tenants to choose from a
wider offer and negotiate more favourable leasing
terms. This constitutes a significant advantage for the
fast-developing sector of business services.
12
11
10
Katowice
Krakow
Lodz
Poznan
Tricity
Wroclaw
Graph source: Savills
Savills contacts
Please contact us for further information
Brian Burgess
Managing Director
+48 (0) 22 222 4004
[email protected]
Mark Freeman
Director, Valuation
+48 (0) 22 222 4040
[email protected]
Tomasz Buras
Director, Office Agency
+48 (0) 22 222 4020
[email protected]
Tomasz Subocz
Associate Director,
Tenant Representation
+48 (0) 22 222 4026
[email protected]
Paweł Pakosz
Negotiator,
Wroclaw Office
+48 (0) 71 390 1257
[email protected]
Savills plc
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